Uptown living, downtown budget

If you live in a new apartment building in Chicago, you might be more likely to spend a typical night downstairs at a mixology or bike repair class—or sitting with neighbors by a fire pit, watching your dogs run around the building’s dog park—than in your apartment watching Netflix.

“I would say it’s the most social building I’ve ever seen,” said Daniel Ellch, a tenant. That’s by design: The developer, Property Markets Group (PMG), is entering the co-living market, offering slightly smaller private spaces and prioritizing common areas built to foster interaction. It’s the path followed by WeLive, Ollie, Common, and other startups, but, as a large developer, PMG is going bigger, with 3,500 units planned in the next five years, built and operated by a new branch of the company called PMGx.

“It was really the company trying to pull back and look at all of the societal macro trends and saying, if we take out everything that is sort of institutionally known about creating a rental building, what’s the product that makes the most sense for modern young professionals?” says Brian Koles, director of brand and tenant experiences at PMG. “People are more transient. They have a lot of debt. People are moving to cities and want to own less—there’s a shift in values toward experience over ownership.”

PMG, which is headquartered in New York City with offices in Miami and Chicago, has completed 85 residential buildings in New York and more than 150 real estate projects in the U.S. since it launched in 1991. The company bought the land for each of the new PMGx buildings, and is building them from the ground up.

At the company’s first building, 120 units in Chicago’s Logan Square neighborhood, someone can choose to rent a bedroom and private bath in a larger three- or four-bedroom apartment with a fully furnished common space and kitchen; all they might need to buy is a bed. The building also has micro-studios. A 464-unit building in Miami will follow in 2018 along with a second building in Chicago, and later buildings in Brooklyn, Denver, and other major markets.

A new model for new builds

If most early attempts at co-living used existing buildings—either hacker house-style conversions of single-family homes, or adaptations of existing apartment or office buildings–the new building was designed from scratch for this purpose.

“Adaptive reuse—changing an existing product—is incredibly expensive and inefficient,” Koles said. “Trying to reverse engineer a vision for a building is also really hard because it’s literal walls and a lot of infrastructure in the way. We have the advantage if we start from the pile of dirt and we get to say, What can we build here that is going to be exactly what we want it to be? And we have the resources to do it at a larger scale than anyone else.”

A three-bedroom apartment has en-suite bathrooms for each room, something a traditional three-bedroom wouldn’t, and is designed with extra insulation for privacy. The bedroom is big enough to fit a queen-sized bed, while others in adapted buildings are typically smaller. The size is still small enough that it makes the room cheaper than a studio in a comparable brand-new luxury building (in Chicago, $1,100 a month versus more than $2,000). It has the typical amenities of other luxury buildings, along with biweekly cleaning for bedrooms and features like an app that tenants can use instead of a key; the app also lets tenants let in guests, get packages from a package locker, and pay rent or make maintenance requests.

All of the buildings will also have carefully designed common areas. “We try to make the space as actually usable as possible,” Koles said. “There’s not just a game room that no one is going to use, but we’ll double down on co-working space, because we think probably about 20 percent of our residents will be working from home.” Some buildings will have public space in the lobby, such as a coffee shop or a cocktail bar. While third-party property managers handle day-to-day operations like rent payments, PMG staff are on site to plan and participate in events, from potlucks to movie screenings.

Each detail of the space is designed for socializing. “We designed furniture in a way that sort of forces people to interact,” Koles said. At the first building, called L after Chicago’s train line, a converted train car near an outdoor grill puts neighbors side by side. “We tend to avoid things like armrests and physical barriers as much as we can so that we can get people actually next to each other.”

New sheriff, new ideas

As luxury buildings, they’re not much like predecessors such as OpenDoor in the Bay Area, which launched in Berkeley 2013 in a converted farmhouse with room for only 16 people. The atmosphere is different, and the company doesn’t even feel fully comfortable with the word “co-living.”

“It makes people think about a dorm or maybe like a kibbutz kind of shared living,” said Koles. “We prefer to think of it as social living. Meaning you have your own private space, but you live here because you want to live most of your life in the common areas with your neighbors having fun, or doing work, and just generally doing well together.”

It believes that it has a better chance of success than some competitors, like Campus, a startup that had more than 30 co-living spaces in converted houses, but closed in 2015 after admitting that it couldn’t figure out how to make it an economically viable business.

“Buying those houses is expensive,” Koles said. “You can’t scale buying a lot of homes. You also can’t get the scale of community if you have 10 or even up to 50 people living in one place. It’s very different than having 100-plus units. So when you do an event… you have the critical mass needed to make it successful. And then there’s just a lot of regulation. If you’re not a developer used to dealing with zoning and cities, it’s really hard.”

Still, OpenDoor, which now has 40 bedrooms in three houses, is currently expanding with six more projects that will have 140 more units, both in the Bay Area and in Portland, Ore. (Three of these are renovations of single-family homes and duplexes, and the other three are newly constructed co-living apartment buildings built in partnership with a developer).

A working business model

The business model for larger buildings may also not be fully proven yet—WeLive, WeWork’s coliving offshoot, reportedly planned to launch 14 locations by the end of 2016, but has only opened two so far, in a former office building in lower Manhattan and another former office in a suburb of Washington, D.C. But others show signs of growth. Common (founded by General Assembly founder Brad Hargreaves), which operates buildings in Brooklyn, San Francisco, and Washington, D.C., quickly had more applications than it could fill, and plans to rent hundreds of additional rooms in 2017.

PMG is convinced that people want to live in social buildings, and that the trend will continue. “We think the scale of this is pretty endless,” said Koles. “I think the macro trends—are here to stay. People are going to be more transient. They’re going to expect more connectivity. They’re probably still going to be staying single longer, which lends itself to this kind of product. We don’t see it as a trend. We’re building buildings to be around for hundreds of years, and we plan to hold them.”

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